Money and Business show
Today well be discussing recent events in the market, break it down and really see what's going on. As we discuss the events well explore where investors should go and invest, and talk about several stocks.
My name is Samuel Ezerzer, your host to the Money & Business show on Radio Shalom, CJRS 1650 AM. Thank you for tuning in live on the Money & Business show, with our Business studios headquarters in Montreal, the financial capital and the home to the greatest hockey team, the Montreal Canadians. We have another great show for you today and as always, you can call if you have any questions, comments, or criticisms on today's topic. Please call us direct at 514 738 4100 ext 200 or email me at moneyandbusinessshow@gmail.com if you have any inquiries. You can also visit our website at http://www.radio-shalom.ca/ – all our shows are archived there.
On Radio Shalom money and Business show 1650am
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Graduated from JMSB with a major in finance and completed the Canadian Securities Course (a certificate type of degree in stock and investing). IN the process of completing the CFA designation ,started getting into finance around university time, have several years experience as an analyst and financial controller. enjoys following various markets such as stock and bond market,
1)What's going on in the markets?
-Feds have been pumping 85 billion/month into economy To keep things going (give little background on this). Goal to reduce interest rates which leads to growth. Once this happens interest rates on loans will start rising
-important note: the intention of the Feds was to signal that the economy is doing great, real estate is starting to rebound and therefore the economy doesn't need 85billiom pumped in every month.
What's the outcome?
-Investors pulling out of stock markets and buying bonds. Last week so much stocks were soldw in one day and the markets tumbled 3.5%.
Jason: all of this because of a simple announcement?
The stock market is characterized by investors overreacting to news and investing on emotion rather than on fundamental research
-we saw an example of this Friday, some journalists started tweeting mentioning how analysts misunderstood the Feds intentions and that things are fine. All of a sudden by the end of Friday the markets rebounded 54 points.
After investors sell their stocks where does the money go?
-investors look around for new investments. Government bonds and inflation protected bonds become popular. This rush to the bond markets lowers the returns on bonds as demand increases. This makes them less attractive And investors start tolook abroad, selling US dollars leading to depreciation
What are investors really scared of? Are they really overreacting
-there scared of the potential that us could face what the Japanese faced (known as the lost decade)
-Japan: similar to us stimulus and bailouts. When gov stopped, deflation occurred. Deflation leads to lower prices (less profit for business) and lower wages (more unemployment) and lower real estate values: essentially the economy grows very little. For 10 years Japan economy stalled.
-of course there are some differences but the fear that deflation could occur is real.
2) Where to invest? What to look out for?
- emerging Europe since emerging economies are not as globalized and they are less affected. look out for defensive industries (transportation, utility companies, telecommunication). Brazil and india good places too.
more investor friendly middle east countries like turkey, Dubai
(largely supported by oil revenues and not leveraged like most modern economics)
-canadian banks (good dividends and stable)
-look out for us real estate market. Once it rebounds the us banks will rebound because they are leveraged on real estate.
3) what's the difference between value and growth in a nutshell?
-value stock represent a company that has stable earnings and pays dividends (a % of companies income paid out quarterly or yearly)
The value of these stocks are mainly derived from its current income which is expected to slowly grow over time
-growth stock represents a company that doesn't necessarily make much money today but Is expected to significantly grow in the future. Investors are willing to pay a premium in anticipation of this growth. Therefore growth stocks are often speculative in nature.
How do we know if a stock if value or growth?
-p/e Ratio usually tells you
-p/e ratio is the price you pay for a stock relative to the current earnings of the stock, so if a stocks p/e is 15, you just Paid 15$ for every 1$ of earning the company made.
-growth stocks have high p/e (usually greater than 15). Just as discussed, investors pay a premium for growth stocks so it's not unusual to pay 30$ or more for only 1$ of current earnings
-value stocks usually have a p/e of less than 15 bc Investors are only willing to pay so much for a stock that has stable earnings and low growth over time.
Talk to me about some stocks, and are they value or growth?
Apple
Home depot
Rim
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